Ítem
Solo Metadatos
Option pricing driven by a telegraph process with random jumps
Título de la revista
Autores
López, Oscar
Ratanov, Nikita
Resumen
Abstract
In this paper we propose a class of financial market models which are based on telegraph processes with alternating tendencies and jumps. It is assumed that the jumps have random sizes and that they occur when the tendencies are switching. These models are typically incomplete, but the set of equivalent martingale measures can be described in detail. We provide additional suggestions which permit arbitrage-free option prices as well as hedging strategies to be obtained. © Applied Probability Trust 2012.
Palabras clave
Keywords
Equivalent martingale measure , Hedging , Jump-telegraph process , Option pricing
